Sequester Goes Into Effect

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For Medicare providers, the 2 percent across-the-board cut to reimbursement is now in effect. It’s implementation on April Fools Day may seem apt as these cuts were supposed to have been so severe and harmful that no one in their right mind would let them go into effect. The whole purpose of the cuts, known as the sequester, was to be a poison pill that would force legislators to put partisan differences aside and work together toward a more strategic and measured approach to cutting the nation’s deficit.

Medicare payments are, of course, cut less than other Federal benefits. The Defense Department, in particular, has had its budget cut severely. But that does not mean that the cut to Medicare reimbursement is not painful, say hospital associations, who predicts that health care job growth and investment in facility upgrades and new equipment will suffer.

The cut may be especially hard on rural hospitals, who have smaller patient volumes and a higher percentage of Medicare patients. "Medicare payments are already 50 to 60 percent of most hospitals' revenue and these cuts are on top of the $3.6 billion in cuts already in effect under the Affordable Care Act," said Doug Leonard, president of the Indiana Hospital Association, in a press release.

Investors are not scared off yet, however. On the same day as the cut went into effect, the stock of Tenet Healthcare (NYSE:THC) hit a new 52-week high. The investor-owned company that owns and operates acute care hospitals, ambulatory surgery centers, diagnostic imaging centers, urgent care centers, and related health care facilities in the United States was trading at $48.55, above its previous 52-week high of $48.25 on Monday, April 1.